Japan's economy contracted by a 15.2 percent annual pace in the first quarter — its sharpest drop on record — as exports plunged, companies slashed production and families cut back on spending, the government said Wednesday.
Wednesday's data confirmed what many had been dreading. The drop in gross domestic product was the steepest since Japan began compiling such statistics in 1955. Compared to the previous quarter, GDP fell 4 percent. That's the fourth straight quarter that the economy shrank.
Like its Asian neighbors, Japan has been been pummeled by the unprecedented collapse in global demand triggered last year by the U.S. financial crisis. Manufacturers have had to suspend production, shut down plants and lay off thousands of workers, and the possibility of a rising jobless rate could drag on any nascent recovery.
This is a huge drop. It also indicates the problems inherent in the current order of things. Asia is built on an export model -- that is, the economies' primary method of growth comes from selling "stuff" to other countries. When the other countries stop buying (like in a workwide recession) the economy takes a massive hit.
This also has ramifications for the US. One of the good stories coming from US GDP reports was exports. But when other countries have problems this severe, US exports will also suffer.